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St. John Providence Health System last week signed a five-year management agreement with Rochester Hills-based Crittenton Hospital Medical Center to lease the former 30,000-square-foot Crittenton Cancer Center.

Under the agreement, St. John will manage the center and offer radiation oncology, chemotherapy, medical oncology, clinical trials, research and imaging services at the newly named St. John Hospital Cancer Center at Rochester Hills, said Jean Meyer, St. John's CEO.

Roy Powell, Crittenton's CEO, said the hospital and its cancer center has been financially struggling for several years.

Powell said the arrest last August of Farid Fata, a medical oncologist who practiced at Crittenton and is accused of bilking $225 million from Medicare, had little to do with the decision to seek an outside cancer care partner.

Fata leased office space at the Crittenton Cancer Center and owned Michigan Hematology Oncology Centers. He was arrested under allegations he intentionally misdiagnosed patients and exposed some unnecessarily to toxic cancer treatment. Jury selection for Fata's trial is expected to begin in August.

"Fata was the smallest piece of the equation. We have a lot of surgeons interested in referring cancers to an analytic center" that is fully staffed now with St. John oncology specialists, Powell said.

Meyer said St. John has been interested in the Rochester area for some time and approached Crittenton about a year ago. The St. John Hospital Cancer Center at Crittenton is St. John's sixth oncology ambulatory care center.

Powell said Crittenton had several options to jump-start its cancer center, including expanding the program itself or creating a joint venture with another company.

"We want to grow medical oncology. We have a strong surgery program, but we have had financial issues the last several years, and the cancer center was part of that. We have a very expensive building. We were looking for the fastest way to move the program forward," Powell said.

A new partner

In July 2011, Detroit's Barbara Ann Karmanos Cancer Institute and Crittenton Hospital dissolved their joint venture agreement of the previously named Karmanos-Crittenton Cancer Center. The $16 million center, which opened in January 2010, was built by Crittenton-Karmanos Health Services LLC.

Officials for Crittenton and Karmanos declined to discuss why their joint venture failed, but Crittenton began to seek another joint venture partner in earnest last August after Powell was hired as CEO.

In seeking a new oncology partner, Powell said Crittenton evaluated two medical groups, including a small internal oncology group, and 21st Century Oncology of Michigan, a division of Farmington Hills-based Michigan Healthcare Professionals.

Amr Aref, M.D., chief of radiation oncology at the new St. John cancer center, said the cancer center at Crittenton has state-of-the art building design and equipment and is accessible to the more than a dozen St. John physicians who will staff it.

"Radiation oncology will be open five days a week for treatment and on Saturdays for consultation," said Aref, who said three radiation oncologists will provide coverage at Crittenton.

But Aref said it could take up to three months to build trust with patients in the Crittenton area after the reputation of the cancer center was sullied by the Fata fraud allegations.

"The Dr. Fata situation has presented some issues" at other St. John clinic locations, Aref said. "Patients ask us (in so many words): How do I know you are giving me correct treatment and not doing something like Dr. Fata? We are lucky all the members of our group have solid reputations."

These types of affiliations between smaller hospitals and larger cancer programs are becoming increasingly common to tap into medical and management expertise, said Justin Klamerus, M.D., chief of oncology with 11-hospital McLaren Health Care in Flint.

"It makes sense to affiliate with major cancer centers and also with comprehensive cancer centers," said Klameras, noting that McLaren acquired Barbara Ann Karmanos Cancer Institute last year.

To be successful, however, Klameras said, Crittenton Hospital will have to develop a larger network of primary care physicians to generate greater patient volume.

That's in the plans, Powell said.

Plan for Crittenton

From 2008 to 2012, Crittenton's operating losses totaled more than $55 million, according to Medicare cost reports provided by Louisville, Ky.-based Cost Report Data Resources. Once investment income is accounted for, the net loss over that period was $26.6 million.

In 2013, Crittenton lost about $21 million on operations and recorded a net loss of $4.7 million, Crain's previously reported.

Last fall, Moody's Investors Services downgraded Crittenton's bond rating to Baa3 from Baa2 on $107.3 million bonds issued by the Michigan State Hospital Finance Authority.

Moody's said the hospital "has endured a trend of unfavorable financial performance, a balance sheet that has eroded over the last several years and additional debt that leverages the hospital."

The center, paid for in conjunction with Karmanos, cost $16 million. The hospital also opened a new $65 million patient tower earlier this year.

During its first year of operation, Meyer said, St. John is looking to increase patient visits at the cancer center to 13,000, up from 11,000. The system will spend about $300,000 to $500,000 in equipment and information technology, she said.

By year two, said Meyer, St. John is hoping to break even financially at the Crittenton-based center.

"It is a startup. We need to gain patients, establish relationships with the community," Meyer said.

Managers of the St. John Cancer Center include Aref; Kathy LaRaia, vice president of oncology; Ayad Al-Katib, M.D., medical director of oncology; and Robert Leonard, M.D., president of Great Lakes Cancer Management Specialists.

Powell said Crittenton's 12 cancer surgeons are eager to start working with St. John physicians. "They have been imploring me since day one to get this going," he said.

"The cancer center program is largely outpatient," Powell said. "Medical oncology procedures are done at the cancer center, but when the surgeon identifies cancer, the patients go to Crittenton (for surgery)."

Powell said Crittenton estimates 1,000 annual surgical procedures under St. John management, up from about 750 annually the previous several years. An average procedure generates about $10,000.

While Crittenton has discussed a sale in the past with Vanguard Health Systems Inc., the former owner of Detroit Medical Center; Beaumont Health System; and McLaren Health Care, Powell said the independent nonprofit hospital isn't talking with anyone at the moment.

"We like who we are dealing with at St. John's," Powell said. "It is only natural we will look at other potential (clinical) relationships (with St. John)."